Restaurant & Hospitality

New Jersey restaurant and club owners who do not possess a coveted New Jersey liquor license can now advertise that they allow customers to bring their own beer or wine or as it is more commonly known, “Bring Your Own Booze” (BYOB).

BYOB is a concept as inherent in New Jersey culture as Bon Jovi. Tommy’s and Gina’s date night involves a cozy pizzeria where the veal special is outstanding, but the pizzeria does not serve liquor. Yearning for a little wine with dinner, they swing by the liquor store a few blocks away and pick up a bottle of red wine on the way to their romantic meal. While this scene is common place in the restaurants of New Jersey, a sign or other advertisement publicizing “BYOB” is not to be found. New Jersey’s archaic liquor license laws have always banned restaurant owners from publicizing the ability for customers to BYOB, but on November 20, 2018, a New Jersey Federal Judge struck down the prohibition ruling that the ban was unconstitutional because it places a content-based restriction on commercial speech.

In order for a restriction on speech to be viewed as constitutional, it must pass strict scrutiny, the most stringent standard of judicial review used by the Federal Courts. Here, the court found that the content-based restriction on speech failed the strict scrutiny test because it was not supported by a compelling government interest nor was it the least restrictive means of achieving the government’s stated purpose.

Commercial speech such as BYOB advertisement is no exception to the high standard of review and such content based restrictions are presumptively unconstitutional. The ruling is just in time for the start of 2019. It doesn’t make a difference if Tommy and Gina make it or not, but they can now be better informed of their BYOB options.

On October 2, 2018 the NJ Division of Alcoholic Beverage Control (“ABC”) decided to suspend enforcement of the September 21, 2018 “ Special Ruling” regarding limited brewery licenses . The suspension of the regulations will provide the ABC with the opportunity to discuss the impact of the new regulations with craft breweries, restaurants, and other licensees. In addition the ABC will work with lawmakers to determine if new legislation is needed to update the 2012 law which authorized limited brewery licenses that gave rise to the issuance of the Special Ruling.

On September 21, 2018 David Rible, the Director of the New Jersey Division of Alcoholic Beverage Control, issued a Special Ruling applicable to NJ Craft Beer Brewery Licensees. The growth of the craft beer industry in NJ (88 limited brewery licenses have been issued and 23 applications are pending) and the manner in which they have expanded their business activities has caused the state to clarify and limit the number and types of activities that can be conducted on the brewery premises.

In 2012, an amendment to New Jersey’s alcoholic beverage control laws was enacted to promote the craft beer industry with the intention that it would help to generate the sale of craft beers at licensed bar/restaurants and retail stores. Under the 2012 law microbreweries were only permitted to serve beer on site in connection with a “tour” however no guidance was provided as to what type of tour was required or the type of events that could occur at the brewery. Although no food was permitted under the law to be served by the brewery, some breweries filled the void by supplying take out menus of nearby restaurants and allowing on site food deliveries.

As stated in the Special Ruling, the 2012 amendment was not intended to permit a brewery with the same privileges as a sports bar, restaurant, catering hall or liquor store. Nonetheless, many breweries have in many respects been acting as if they possess these full licensed privileges, without limitation, hosting trivia nights, live performances, sporting events, special events and private parties.

The Special Ruling now clarifies what activities are permitted and prohibited on the licensed brewery premises, clarifies the provision of the required tour, further clarifies the prohibition of food service, and limits the number and types of activities. For example, no more than 25 on premises public/ special events a year, 12 off premises events such as festivals, fairs or athletic events, and 52 private parties including trade and civic associations. Additionally, a simplified E- Notification permit system is being instituted. The new rules are to take effect immediately and are actually a precursor to new regulations to be implemented by the State affecting the craft brewery industry.

Unfortunately, with upcoming Octoberfest events and already booked holiday parties these new regulations may have a stinging effect on many microbreweries’ bottom line.

New Jersey’s liquor license laws have generally remained unchanged for decades and have been a sore spot for municipalities seeking to fuel economic growth and small businesses hoping to open in town centers across the State. Assemblymen John Burzichelli and Raj Mukherji have heard those concerns and others, and recently sponsored a bill in the New Jersey Assembly, A3494, which proposes reforms to the NJ liquor license system.

Under the current liquor license laws, the State of New Jersey limits the number of maximum liquor licenses within a municipality based on population. Critics of the existing framework argue that the municipalities are beholden to census numbers that are updated every 10 years and with many of the issued licenses pocketed and not in use, many business owners that are ready and willing to serve cannot because of population density issues and pocketed licenses. Proponents of reform also note that liquor licenses tend to be very expensive, even topping $1,000,000 in some particularly hot markets, which may give established restaurant groups with deeper pockets an advantage over start-ups.

The bill, in its proposed form, would allow municipalities to issue two new types of liquor licenses to smaller businesses. One proposed license would permit service at tables, but not at a bar, and another proposed license would allow for only beer and wine service. The new licenses would have a significantly lower price than the existing liquor licenses. However, existing liquor license owners oppose the bill because new purchasers would be able to obtain a liquor license at a much lower cost which, in turn, may devalue existing liquor licenses obtained at a high price tag. To address this concern, the bill contemplates a tax credit to those existing businesses that have paid market value for their licenses, with a portion of the initial fee and renewal fees for new licenses paid to the State to help offset the cost of tax credits that would be issued to existing license holders.

The bill was released from the Assembly Oversight, Reform and Federal Relations Committee on May 17, 2018 and subsequently referred to the Assembly Appropriations Committee. As Assemblyman John Burzichelli has said, the bill is a work in progress. For now, supporters of the bill will need to wait and see if the traction persists and in the meantime, continue to BYOB.

Cheers! New Jersey’s Agricultural and Natural Resources Committee voted 5-0 last week in favor of bill A2196. The bill is designed, among other things, to eliminate the current “mandatory tour” obligation imposed upon New Jersey’s craft brewers. Under the current state of the law, craft brewers are required to provide a tour of their facilities each and every time a patron enters the premises to purchase the breweries’ products for on-site consumption – whether it is the individuals first or one-hundredth time visiting the facility. If passed, the pending legislation will alleviate craft breweries of this oft-criticized requirement in the hopes of placing New Jersey brewers on par with their competitors in neighboring states where such tours are not required.

As the bill continues to gain steam among craft brewers, many New Jersey bars and restaurants have expressed opposition. These groups fear that the bill will provide breweries with an end-run around the steep costs of obtaining liquor licenses and thereby unfairly compete in the market.

At the present time, the bill is awaiting a second reading before the State Assembly.